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Insights from the Broke Ape Yacht Accident: Takeaways for Justin Bieber and Fellow NFT Enthusiasts

Investors in the Bored Ape Yacht Club, the popular "profile pic" (PFP) NFT collection that experienced a tremendous surge in value in early 2022, find themselves caught in a web of bitterness and blame. The Apes market has suffered a severe blow due to a decline in interest in NFTs, leading to a significant drop in floor prices. From reaching a peak of 153.7 ETH in April 2022, the lowest price at which an Ape can be bought has plummeted to a meager 27.4 ETH. The situation has sparked a whirlwind of finger-pointing and recriminations among investors and observers alike.

The floor price serves as an indicator of the overall worth of an NFT collection, making an 82% decline in the floor price potentially lead to even larger decreases in the value of individual Bored Apes and associated assets. A striking illustration of this is Justin Bieber's ownership of an Ape, which was purportedly valued at $1.3 million previously but now receives the highest bid of just over $58,000, representing a staggering 95% drop.

It is important to acknowledge that early Ape holders remain in a favorable position, and Bored Apes continue to hold significant value and are actively traded compared to other NFT collections. Moreover, they are not the sole crypto-assets to have witnessed a drastic surge and subsequent decline in recent years. Additionally, their decline aligns with the overall trend in the NFT market, which, according to certain indicators, is currently at its lowest point in two years.

However, there are significant lessons to be gleaned from the Bored Ape Yacht Club (BAYC) phenomenon. Numerous buyers, especially those who exhibited excessive enthusiasm, have paid exorbitant amounts as a form of "market tuition" to grasp these lessons. If you happen to have the opportunity to learn them without incurring any costs, it is wise to pay close attention.

1. Pride Cometh Before the Fall

While it may not be a direct market lesson, it remains the most crucial one: The current heightened awareness of the Apes' failure stems partly from the questionable conduct exhibited by holders during prosperous times.

A portion of the unfavorable sentiment towards Apes can be attributed to the typical behavior exhibited during a crypto bull market, including extravagant but uninspiring parties. However, whether justified or not, Ape-holders have acquired a reputation for being exceptionally toxic and self-centered. In the eyes of many, a Bored Ape serves as a visual representation of someone who unironically tweets "have fun staying poor" to anyone daring to question the value of a monkey JPEG worth half a million dollars.

This behavior, although initially understandable as a defensive reaction to the widespread ridicule aimed at Apes, is ultimately a strategic blunder (similar to Bitcoin). The prevailing lack of positive sentiment towards Apes, both within the crypto communities and beyond, is now directly resulting in diminished financial backing for these assets.

This is because the rhetoric surrounding NFTs and "community" holds true: the community of owners significantly impacts the value of these assets. Two notable examples of PFP communities, Wassies and Miladies, have demonstrated considerably stronger value retention compared to Apes over the past year, albeit starting from a lower initial point.

Therefore, question yourself: do you truly wish to be part of a community where someone purchased their Ape solely because they failed to recognize that Paris Hilton's remarks on television were essentially a joke?

2. Aggressive marketing is a red flag

Bored Apes garnered significant attention and scrutiny from crypto veterans, primarily due to their relentless marketing efforts aimed at the general public. This was exemplified notably by the uncomfortably awkward segment featuring Paris Hilton on Jimmy Fallon's Tonight Show, which further heightened their notoriety.

Both mainstream skeptics and experienced crypto enthusiasts quickly latched onto that particular moment due to its obvious falseness. The lack of sincerity was glaringly evident, as it often tends to be in such circumstances. (Personally, I think Paris tanked it on purpose. She’s nobody’s fool.)

There are compelling financial motives to steer clear of projects that partake in such artificial marketing tactics: it not only artificially inflates the asset market but also renders it more vulnerable. In the context of cryptocurrency assets, this can result in acquiring numerous holders with weak conviction who lack a genuine comprehension of the value proposition associated with their purchases.

Simultaneously, inorganic hype tends to foster speculation instead of active participation, thereby weakening a market. A market built on cultural value sustains itself better when individual holders have embarked on personal journeys leading to genuine fondness for a particular entity, rather than merely encountering commercial advertisements for it.

When a Bored Ape makes an appearance on a talk show, individuals with significant financial resources might opt to purchase multiple apes instead of just one for their personal collection. However, this action simultaneously raises the entry threshold for new holders and creates concentrated areas of market vulnerability for the asset.

This scenario was demonstrated in April of this year when a prominent Bored Ape owner swiftly sold numerous NFTs within a few days, causing market values to plummet to their lowest point in five months. A thriving NFT ecosystem thrives on widespread organic demand and an active community primarily composed of individual holders, rather than a significant number of speculators burdened with substantial holdings, ready to sell off when market conditions take an unfavorable turn.

3. Don’t leverage speculative assets

There are currently some highly embarrassing stories emerging from the BAYC community, involving individuals who used their Apes as collateral for loans and are now facing the consequences as the value of BAYC drops. A notable case is BendDAO, as reported by Protos, which is liquidating numerous Apes that were seized due to unpaid loans. Bend is merely one of several similar services, and these liquidations could potentially be contributing to a downward spiral in BAYC values.

The notion that NFTs were suitable as financial instruments at such an early stage in their existence raises serious doubts, despite the legitimacy and potential profitability of offering such services. However, it is an unequivocally terrible decision for borrowers to incur debt against a volatile asset, regardless of whether it's a cryptocurrency or not. As a result, these borrowers are now being compelled to sell their Apes at the least opportune moment, instead of waiting for a more favorable market condition.

4. If you’re not first, you’re last

The Apes currently facing significant difficulties are undoubtedly those who made their purchases at the market's peak. Unfortunately, some of them have experienced even more substantial losses than Justin Bieber, and a significant portion of their investments may never be recovered.

Determining the precise point at which you're investing in an overheated market is no simple task. To begin with, aggressive marketing tactics should be taken into account. Whether it's a hyped-up endorsement on late-night television or an AI startup CEO making exaggerated statements, caution should be exercised. Such promotional messaging likely contributes to inflating the value of the asset in question beyond its true intrinsic worth.

One of the most cautious perspectives to consider is that if others have already made exorbitant profits on a speculative investment, it's highly likely that it's too late for you to benefit significantly from that surge, regardless of the asset in question. In such a scenario, you run the risk of being left behind and potentially facing substantial losses.

This is especially true for community-driven NFTs, as when you invest in a rapidly appreciating asset with the anticipation of future gains, it's highly likely that everyone around you is following the same strategy. In other words, an NFT bubble, more so than most markets, undermines the potential for a genuine community to thrive, as it taints the very environment in which such a community could organically develop.

Put differently, the Bored Apes are now experiencing the consequences of their actions, which, in essence, amount to very little in terms of tangible returns.